There are complicated restrictions to prevent vertical integration (AB 266, 19328). In general, licensees can only hold licenses in up to two separate categories. Small cultivation licensee Types 1-2 may hold manufacturing or Type 10A retail licenses (limited to three dispensaries). It appears that Types 3-4 licensees can't apply for manufacturing licenses at all. However, Type 10A licensees can apply for both manufacturing and cultivation licenses, provided their total cultivation area doesn't exceed 4 acres. Also, facilities in jurisdictions that require or permit cultivation, manufacture, and distribution to be integrated as of July 1, 2015, may continue to operate that way until Jan 1, 2026.

DISTRIBUTORS REQUIRED

Type 11 distributors are a new kind of entity that has been created to regulate the flow of products. ALL cultivation and manufacturing licensees are required to send their products to a Type 11 licensee for quality insurance and inspection before passing them to the next stage of manufacturing or retailing. The Type 11 licensee in turn submits the product to a Type 8 laboratory for batch testing and certification. Afterwards, the sample returns to the Type 11 distributor for final inspection and execution of the contract between the cultivator and manufacturer or manufacturer and retailer. The Type 11 distributor charges a fee that covers the testing plus any applicable taxes (the Act doesn't impose any new taxes, but anticipates that could happen in the near future) (AB 266, 19326) Type 11 distributors and Type 8 testing facilities cannot hold any other kind of licenses (however, licensees may have their own labs for in-house testing).

LOCAL PERMITS REQUIRE

No person shall engage in commercial activity without BOTH a state license and a license, permit, or other authorization from their local government. (AB 266, 19320(a); AB 243, 11362.777 (b)).

LAWFUL ACTS

Actions by licensees that are permitted by both a state license and local government are lawful, and the licensee is protected from arrest, prosecution, or other legal sanctions (AB 266, 19317).

GRANDFATHERING

Facilities already operating in compliance with local ordinances and other laws on or before Jan 1, 2018 may continue to operate until such time as their license is approved or denied. [AB 266, 19321(c)]. Facilities in operation before Jan 1, 2016, shall receive priority. Los Angeles may in any case continue to prosecute violations of Measure D.

APPLICANT QUALIFICATIONS (SB 643, 19322):

Applicants must provide proof of local approval and evidence of legal right to occupy any proposed location. Applicants shall submit fingerprints for DOJ background check. Cultivation licensees must declare themselves "agricultural employers" as defined by Alatore-Zenovich-Dunlap-Berman Agricultural Labor Relations Act. A licensing authority MAY deny an application if the applicant has been convicted of an offense substantially related to qualifications, including ANY felony controlled substance offense, violent or serious felonies, or felonies involving fraud, deceit or embezzlement, or any sanctions by a local licensing authority in the past 3 years [SB 643, 19323(a)(5)].

FOR-PROFIT ENTITIES

Are implicitly allowed under the qualifications established above. These were previously "not authorized" under SB 420, but the new licensing provisions extend to individuals, partnerships, corporations, business trusts, etc. [under the definition of "person" in AB266, 19300.5 (a)]. Likewise, applicants no longer need be patients.

CULTIVATION LICENSING

The DFA shall establish a medical cannabis cultivation program. All cultivation is subject to local land use regulations and permits. In cities and counties without cultivation regulations of their own, the state shall be the sole licensing authority as of March 1, 2016 [AB 243, 11362.777 (c)(4)]. NOTE: According to the author, this provision was included as a result of a drafting error and will be removed.

TRACK & TRACE PROGAM

The DFA shall implement a unique identification program for all marijuana plants at a cultivation site, to be attached at the base of each plant. The information shall be incorporated into a "track and trace" program for each product and transaction [SB 643, 19335 and AB 243, 11362.777 (e)]. Cultivation in violation of these provisions is subject to civil penalties up to twice the amount of the license fee, plus applicable criminal penalties. Fines enacted daily for each violation (SB 243, 19360).

PATIENT EXEMPTION

Qualified patients are exempt from the state permit program if cultivating less than 100 square feet for personal medical use. Primary caregivers with five or fewer patients are allowed up to 500 square feet [AB 243, 11362.777(g) and SB 643, 19319]. Exemption under this section does not prevent a local government from further restricting or banning the cultivation, provision, etc. of medical cannabis by individual patients or caregivers in its jurisdiction (AB 243).

DELIVERIES

Cannabis may be delivered to qualified patients only by dispensaries and only in cities or counties where not prohibited by local ordinance. All deliveries are to be documented. No locality can bar transport of delivered products through its territory. Local county may tax deliveries. (AB 266, 19340). {In a separate section [19334 (a) 4] it is confusingly stated that dispensers who have no more than three dispensaries (Type 10A) shall be allowed to deliver "where expressly authorized by local ordinance." It's unclear what conditions if any apply to other, Type 10 licensed dispensers.}

MANUFACTURERS

Manufacturers are to be licensed by DPH. The DPH shall limit the number of Type 7 licenses that produce products using volatile solvents.

TESTING (AB 266, 19341-6)

The DPH shall ensure that all cannabis is tested prior to delivery to dispensaries or other businesses, and specify how often such testing shall be conducted. [Confusingly, 19346(c) says the costs of testing are to be paid by cultivators, whereas 19326(c) (3) states that distributors shall charge for the costs of testing; since distributors serve manufacturers as well as cultivators, it doesn't make sense that testing costs for the former should be charged to the latter.] Licensees shall use standard methods established by International Organization for Standardization approved by an accrediting body that is a signatory to the International Laboratory Accreditation Cooperation Mutual Recognition Arrangement (AB 266, 19342). Licensees shall test for cannabinoids, contaminants, microbiological impurities, and other compounds spelled out in Section 19344. Licensees may conduct tests for individual qualified patients, but not certify products for resale or transfer to other licensees.

Only licensed transporters can transport cannabis or cannabis products between licensees [AB 266, 19326(a)]. The bill doesn't specify whether cultivators, manufacturers, or retailers can also have transport licenses, but 19328 (a) states they can generally have at most two separate kinds of licenses. Licensed transporters shall transmit an electronic shipping manifest to the state and carry a physical copy with each shipment (SB643, 19337).

LABOR PEACE AGREEMENTS

Labor peace agreements are required of all applicants with 20 employees or more (SB 643, 19322 a (6))

PACKAGING

Products shall be labeled in tamper-evident packages with warning statements and information specified in Section 19347.

The provision in SB 420 affording legal protection to patient collectives and cooperatives, HSC 11362.775, shall sunset one year after the Bureau posts a notice on its website that licenses have commenced being issued. After that date, all cannabis collectives will have to be licensed, except for individual patient and caregiver gardens serving no more than five patients.

PHYSICIAN RECOMMENDATIONS (SB 643):

There are several new provisions clarifying the duties of medical cannabis physicians; however, they don't substantially affect or impair patients' current access to medical recommendations.

• The Med Board's enforcement priorities are amended to include "Repeated acts of clearly excessive recommending of cannabis for medical purposes, or repeated acts of recommending without a good faith prior exam." (SB 643, 2220.05). This is

identical to existing language regarding controlled substances, which has generally been assumed to apply to MMJ heretofore.

• It is unlawful for physicians who recommend to accept, solicit, or offer remuneration to or from a licensed facility in which they or a family member have a financial interest.

• The Med Board shall consult with the California Center for Medicinal Cannabis Research in developing medical guidelines for MJ recs.

• The recommending person shall be the patient's "attending physician" as defined in HSC 11362.7(a). Contrary to popular misconception, this in nothing new and in no way limits patients to their primary care physician. It merely restates current language in SB 420.

• Physician ads must include a warning notice that MMJ is still a federal Schedule I substance.

PESTICIDE STANDARDS

Pesticide standards shall be promulgated by DFA and the Dept. of Pesticide Regulation (SB643, 19332).

ORGANIC CERTIFICATION

Organic certification will be made available by DFA by Jan 1, 2020, federal law permitting. [SB643, 19332.5(a)]

APPELLATIONS OF ORIGIN

The bureau MAY establish appellations of origin for cannabis grown in California. No product may be marketed as coming from a county

where it was not grown. [SB643, 19332.5(b-d)]

FEES and FUNDING

Each licensing authority shall establish a scale of application, licensing and renewal fees, based upon the cost of enforcement. Fees shall be scaled dependent on the size of the business [AB 243, 19350 (c)]. A Medical Marijuana Regulation and Safety Act Fund is established in the state treasury to receive fees and penalties assessed under the act. $10 million is allocated to DCA to begin operations, with the possibility of an additional operating loan of $10 million from the General Fund (AB 243, 19352). The Bureau shall use the fund for a grant program to assist state and local agencies in enforcement and remediation of environmental impacts from cultivation. (AB 243, 19351)

COUNTY TAXATION

Counties may levy a tax on the cultivating, dispensing, producing, processing, distributing, etc., of medical cannabis subject to standard voter approval requirements. (Many cities already exercise this authority, but the authority of counties to do so has been unclear heretofore). (SB 643, 19348)